Parexel to go private in $5B Pamplona Capital buyout deal

After growing rumors this week, Parexel has become the latest CRO to be bought up as the industry continues its M&A bonanza.

Pamplona Capital Management announced this morning that it will be buying the CRO for $88.10 a share in cash (it ended the day yesterday at just under $84 a share), which works out at around $5 billion (including debt). The CRO will become a private company under the deal and no longer be listed on any public market.

While not a major jump on yesterday’s share price, Pamplona points out that this is a 27.9% premium to the CRO’s unaffected closing stock price on May 5, the last trading day prior to speculation over a deal from the WSJ, which has bumped up its stock.

It’s also a 23.3% premium to its undisturbed 52-week high and comes amid a hum of activity in the CRO space, which has seen major mergers, acquisitions, buyouts and funding for the past two years.

Its shares shot up premarket by 8% this morning, to over $90 a share. The deal is set to be done by the fourth quarter.

Josef von Rickenbach, chairman and CEO of Waltham, MA-based Parexel, said in a statement: “Parexel benefits from a strong operating foundation with expertise and resources to support our clients in their clinical trials around the world. However, as our results over the past year show, the market for biopharmaceutical services is evolving. We believe the more flexible corporate structure afforded by this transaction will better position us to advance Parexel’s strategy in light of these realities and to shape the company to best capitalize on our exciting market opportunities.”

He added: “This transaction and the meaningful value it delivers for our shareholders is a testament to the 19,600 employees who help our clients advance the development and commercialization of new medical therapies worldwide, and we will remain focused on providing our clients with the service and support that have long set Parexel apart.”

Parexel has just under 20,000 employees and made $605 million in revenue in the March quarter, according to its financials. But has been in the process of slimming down, as the CRO has had several rounds of job cuts since it dialed down its 2016 outlook in 2015. Those include 850 jobs announced 2015, in order to save about $20 million to $30 million a year from 2016, plus 1,100 to 1,200 worldwide announced just a few months ago, amid the buyout rumors.

Jeremy Gelber, M.D., partner at Pamplona, said in the statement: “We have great respect for the global leadership that Josef and the talented employees at Parexel have built. We are excited to partner with a company and a team that have a strong track record in helping to successfully navigate the complexities innate to the biopharmaceutical industry and bring new therapies to market.”

Pamplona, a 12-year-old private-equity firm, has bases in London and New York and has raised five funds with over €7 billion ($7.8 billion) of capital commitments, with an eye to healthcare-services companies.